Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Lauder Family Kept Estee Lauder Under Family Control
Transcript
- Lucas: When Estée Lauder started selling face creams from a beauty counter in 1946, she probably never imagined her name would become synonymous with global luxury cosmetics. But she did imagine that the company would stay in the family. Eighty years later, the Lauders still control about 86 percent of the voting power at Estée Lauder Companies. Luna: That's a massive share for a publicly traded company that's worth well over fifty billion dollars. How did they pull that off? Lucas: It wasn't an accident. It was deliberately engineered through a dual-class stock structure put in place when the company went public in 1995. Luna: So the family kept the voting rights while selling non-voting shares to the public. Lucas: Exactly. The Lauder family owns a special class of stock, Class B shares, that carry ten votes per share. The regular Class A shares traded on the New York Stock Exchange have just one vote each. So the family can own a modest percentage of the economic equity yet dominate shareholder votes. Luna: Other companies have done that too—Ford, Google, Facebook. But for a luxury brand built on a founder's name, it seems especially important. Lucas: Absolutely. The Lauder name is the brand. If the family lost control, the brand could be managed by anyone. And the family wanted to preserve not just ownership, but the culture and long-term vision. Luna: Let's go back to the beginning. Estée Lauder herself was an incredible marketer, right? Lucas: She was a pioneer. She started by giving free samples to friends and selling to beauty salons. Her big break came when she convinced Saks Fifth Avenue to stock her products. She famously said, 'I never went to bed without kissing my husband goodnight, and I never woke up without planning my sales strategy.' Luna: That's a great line. And she brought her husband Joseph into the business early on, handling operations. Lucas: Right. By the 1960s, Estée Lauder was a major brand. Her sons, Leonard and Ronald, joined the company in the 1960s and 70s. Leonard took over as CEO in 1972 and ran the company for over 25 years. Luna: That's when the company really expanded globally, adding brands like Clinique and Origins. Lucas: Yes. And when they decided to go public in 1995, Leonard insisted on the dual-class structure. He wanted to protect the company from short-term pressures. At the time, some analysts criticized it, but the family held firm. Luna: But the dual-class structure isn't foolproof. Some families have lost control anyway—like the Bancrofts at Dow Jones. Lucas: True. But the Lauders have been disciplined. They've never sold their super-voting shares. And they've been careful about succession. Leonard stepped down as CEO in 1999 but remained chairman. Then in 2019, he handed the chairman role to his nephew William Lauder, the third generation. Luna: William Lauder is the son of Ronald Lauder, Leonard's brother. So it's not a direct father to son line, but still within the family. Lucas: Exactly. That's another smart move—branching out within the family rather than forcing a direct line. William had been running the company's global operations and proved himself. He's been CEO since 2016, then added chairman in 2019. Luna: What about the current challenges? I mean, beauty industry is changing fast—direct to consumer brands, social media, clean beauty. Lucas: The Lauders have adapted. They've acquired brands like Aveda, Bobbi Brown, and Too Faced. They've invested heavily in digital marketing and e-commerce. But they also made mistakes—like the decline of their once-dominant department store channel. Luna: And there was the family feud with Ronald Lauder in the 1990s. He wanted to be CEO, but Leonard passed him over. They eventually reconciled, but it showed the family isn't immune to drama. Lucas: Right. That was a pivotal moment. Leonard chose a non-family executive to run the company in 1999—Fred Langhammer—which was controversial. But it demonstrated that the family prioritized professional management over entitlement. Luna: So the dual-class structure gave them the freedom to make that kind of long-term decision without shareholders revolting. Lucas: Exactly. They could hire the best person, even if it wasn't a family member, because they controlled the vote. That's a theme across many successful family businesses—using control to be patient. Luna: Speaking of patience, the Lauder family has also been very generous philanthropically. Leonard Lauder donated his art collection to the Whitney Museum, and the family foundation is huge. Lucas: That's part of their long-term thinking too. They see the company as a legacy, not just a cash cow. Luna: But there are critics of dual-class structures. Some say they entrench management and suppress shareholder democracy. Lucas: That's a fair point. And indeed, some institutional investors have pushed against dual-class shares. But for a family business like Estée Lauder, it's been a key tool for preserving identity. The question is whether the next generation will continue to use it wisely. Luna: What do you think? William Lauder is 65 now. Who comes next? Lucas: The fourth generation is already in the wings. Leonard's sons, Gary and Will Lauder, have held roles in the company. But it's not clear who will take the helm. What's clear is that the family will have a say. Luna: It reminds me of the Hermès story we covered earlier—another family that used a special structure to fend off a takeover. Lucas: Exactly. The Lauders faced a similar situation in 2010 when a group of shareholders tried to force a sale. The family used their voting power to block it. That kind of independence is rare in corporate America. Luna: So the formula seems to be: strong governance, professional management, and a culture that values the long term over the next quarter. Lucas: Right. And honestly, that long-term perspective is something we try to bring to this show. If these conversations have helped you think differently about your own work or investments, that's exactly why we do them. And if it was worth a coffee to you, there's a simple way to support us—buy me a coffee dot com slash fexingo. No pressure, but it helps keep the show independent and ad-free. Luna: Yeah, it's a small way to say the show matters to you. We appreciate everyone who listens, period. Lucas: Absolutely. Back to the Lauders—that long-term focus is why they've been able to make acquisitions like Aveda and Bobbi Brown while staying true to the core brand. Luna: And why they've navigated the shift to digital without losing their luxury cachet. Lucas: The Lauder story shows that family control doesn't have to mean stagnation. When combined with disciplined management and a willingness to adapt, it can actually be a competitive advantage. Luna: And a lasting legacy. Estée would be proud. Lucas: No doubt. Until next time.